A gaming venue must have an entitlement for each gaming machine it operates, allocated by the State in accordance with the Gambling Regulation Act 2003. The current gaming machine entitlements last ten years and will expire in 2022.
New gaming machine arrangements
On 7 July 2017, the Minister for Consumer Affairs, Gaming and Liquor Regulation Marlene Kairouz announced new gaming machine arrangements that will help limit gambling related harm and give certainty to pubs, clubs and hotels across Victoria.
7 July 2017 - announcement
Under the changes, the number of gaming machines in Victoria will remain capped at 27,372 and the maximum number of gaming machines in a single venue will be frozen at 105.
The reforms include:
- replacing the current 10 year term with a 20 year term, and requiring venue operators to make two sets of premium payments – the first in 2022 and the second in 2032
- giving venue operators the opportunity to acquire post-August 2022 entitlements up to the number of entitlements they held on 7 July 2017 through an administrative allocation process, rather than a competitive process
- increasing the maximum number of entitlements held by a club venue operator from 420 to 840
- adjusting the 50:50 rule to facilitate the allocation of unused club entitlements to the hotel sector
- determining premium payments for entitlements based on a venue’s gaming revenue
- making changes to the current gaming machine taxation arrangements to make them more progressive.
These changes have been made as part of a review of the regulatory arrangements for gaming machines – enabling pubs, clubs and hotels to make decisions with certainty well before their current entitlements expire in 2022.
The allocation process is expected to be complete by the end of 2018.
New venue operators and existing venue operators wanting to acquire extra entitlements will have the opportunity to apply for entitlements not taken up during the initial offer.
Allocation and pricing of future gaming machine entitlements
The following information is provided as a guide to how future gaming machine entitlements will be allocated and priced. The information is subject to the Gambling Regulation Act 2003 and determinations by the Minister for Consumer Affairs, Gaming and Liquor Regulation (Minister) under that act, including any transfer and allocation rules that the Minister may make.
The new tax rates set out below that will apply from August 2022 are subject to the passage of legislation through the Parliament.
The Department makes no representation or warranty about the completeness, accuracy or suitability of the information for any purpose. The State of Victoria is not liable to you or any other person for any loss or damage arising from the use of or reliance on the information.
The allocation process
All venue operators will have the opportunity to acquire up to the number of entitlements they held on 7 July 2017. This is subject to any change the Minister may make to the maximum number of entitlements that can operate under the relevant regional cap or municipal limit and compliance with the allocation rules made by the Minister.
The Minister will write to each venue operator, including those venue operators who did not hold entitlements on 7 July 2017, inviting the venue operator to nominate the number of entitlements they wish to acquire.
Following receipt of each venue operator’s nomination, the Minister will allocate the nominated number of entitlements to each club and hotel venue operator who held entitlements on 7 July 2017, up to a maximum equal to the number of entitlements held on that day.
After the Minister has allocated entitlements to each venue operator who held entitlements on 7 July 2017 (up to the maximum held on 7 July 2017), any ‘left over’ club entitlements will be allocated to clubs in the following order of priority:
- firstly to clubs seeking more entitlements as a result of a revenue sharing agreement or amalgamation
- secondly to new club entrants
- thirdly to incumbent club venue operators seeking additional entitlements up to 420, and
- fourthly to club venue operators seeking to buy more than 420 entitlements up to a maximum of 840 entitlements.
If there are any club entitlements left over after the above process is completed, the Minister will make a decision as to how many unallocated club entitlements (if any) will be transferred into the hotel entitlement pool.
After the allocation to clubs is completed, the Minister will allocate any unallocated hotel entitlements in the following order of priority:
- firstly to new hotel entrants, and
- secondly to incumbent hotel venue operators seeking to acquire additional entitlements over and above those held on 7 July 2017.
If demand exceeds supply at any step in the allocation process entitlements will be allocated on a proportional basis (where possible).
Indicative entitlement pricing
Price for venue operators with operating entitlements
Venue operators will have the opportunity to acquire up to the number of entitlements they held on 7 July 2017.
The majority of entitlements held on 7 July 2017 are being used to operate gaming machines (‘operating entitlements’). A small number of entitlements are held but not being used by venue operators (‘non-operating entitlements’).
For operating entitlements, the price will vary for each venue and will be calculated based on each venue’s average gaming revenue per machine. The formula will use revenue for the years 2013-14 to 2016-17. Each year’s revenue will be given a weighting, with greater weight being given to the most recent revenue data. The weightings used will be:
- 2013-14 – 10 per cent
- 2014-15 – 20 per cent
- 2015-16 – 30 per cent
- 2016-17 – 40 per cent.
The weighted average gaming revenue per machine for each venue is then multiplied by a State Multiplier of 46.35 per cent to arrive at the entitlement price for that venue (subject to the minimum price – see below).
This produces the following pricing formula:
A x B = EP
- A = Weighted average of a venue's gaming revenue per EGM over the last 4 financial years
- B = State Multiplier at 46.35%
- EP = 2022 entitlement price
Price for venue operators with non-operating entitlements
The majority of venue operators who hold non-operating entitlements also have operating entitlements for which an entitlement price will be determined using the pricing formula above.
Where a venue operator who holds operating and non-operating entitlements operates only one venue, the entitlement price for the non-operating entitlements will be the same as the price paid for operating entitlements at that venue.
Where the venue operator operates more than one venue, the average entitlement price for the entitlements at the venue operator’s existing venues will be the price for the venue operator’s non-operating entitlements.
Where a venue operator holds non-operating entitlements but does not operate a venue, the entitlement price will be calculated in the same way as the price for new venue operators (see below).
Price for new venue operators
New venue operators for the purposes of the allocation process are venue operators who did not hold any entitlements on 7 July 2017 but who want to acquire entitlements during the allocation process.
Under the allocation process new venue operators will be able to register their interest in purchasing entitlements. In order to participate in the allocation process, potential new venue operators must hold a venue operator licence issued by the Victorian Commission for Gambling and Liquor Regulation.
New venue operators will need to nominate how many entitlements they wish to acquire and the location and type of venue (club or hotel) in which they plan to operate those entitlements. This will enable the entitlement price to be determined.
The price for new venue operators will be based on the gaming revenue of a venue of similar size, type and location as the new operator’s proposed venue.
There will be an adjustment to the price for new venue operators once they start operating gaming machines under entitlements acquired during the allocation process if the size, type and location of the venue is significantly different to that nominated during the allocation process.
If you are a potential new venue operator, you can calculate an indicative entitlement price using the pricing formula above and the historical gaming revenue data for a venue of a similar location, size and type. This data is available on the Victorian Commission for Gambling and Liquor Regulation’s website at https://www.vcglr.vic.gov.au/resources/data-and-research.
Alternatively, an indication of price can be obtained by using 2016-17 data for a similar venue using the simple pricing calculator provided below. You will need to enter the 2016-17 gaming revenue data for a venue of your choice in the gaming machine revenue field below, then enter the number of gaming machines operating at that venue in 2016-17 in the number of EGMs field. The calculator will then provide an indicative price per entitlement for that venue.
There will be a minimum price for all entitlements, regardless of the price determined by the pricing formula. The minimum price will be $5170 per entitlement for club entitlements and $32,714 per entitlement for hotel entitlements.
Venue operators will be required to pay a deposit for the entitlements they acquire during the allocation process, with the balance payable in August 2022. Deferred payment terms will be available.
Detailed payment arrangements
Information on payment arrangements is set out below.
- clubs – 5 per cent
- hotels – 10 per cent
- deposit due – end of February 2018 (based on current allocation timelines and subject to change)
- hardship arrangements for payment of deposit will be available upon application (using current hardship process and criteria).
Payment of balance:
- balance of the entitlement price will be due on 16 August 2022 (upon commencement of entitlement)
- venue operators will be given the option to pay the outstanding entitlement price in full or enter into a deferred payment arrangement
- maximum term for deferred payments will be five years
- interest will be payable on deferred payments (the interest rate payable will be advised at a later date).
Tax arrangements from August 2022
The current tax arrangements will be amended to:
- introduce a new tax bracket for venue operators earning between $6667 and $12,500 per month in average per machine revenue
- increase the tax rate for the top (highest paying) bracket
- introduce a sliding scale for the club tax concession.
The tables below show the current and new tax brackets and rates, as well as the new sliding scale for the club tax concession.
Tax rate and threshold tables for clubs and hotels
|Monthly average per machine revenue ($)||Current: tax rate (%)||Monthly average per machine revenue ($)||From August 2022: tax rate (%)||Tax concession rate (%)|
|Less than 2666||0||Less than 2666||0||8.33|
|2666 or more and less than 12,500||46.70||2666 or more and less than 6667||46.70||8.33|
|6667 or more and less than to 12,500||51.17||6.33|
|12,500 or more||54.20||12,500 or more||60.67||4.33|
|Monthly average per machine revenue ($)||Current: tax rate (%)||Monthly average per machine revenue ($)||From August 2022: tax rate (%)|
|Less than 2666||8.33||Less than 2666||8.33|
|2666 or more and less than 12,500||55.03||2666 or more and less than 6667||55.03|
|6667 or more and less than to 12,500||57.50|
|12,500 or more||62.53||12,500 or more||65.00|
Indicative gaming machine entitlement price calculator
The indicative price is a guide only and does not constitute the actual price payable for an entitlement. The Minister has not yet determined the price payable for an entitlement and reserves the right to determine a price which differs from the indicative price.
The Department makes no representations or warranties of any kind about the accuracy or suitability of the indicative price for any purpose. If you rely on the indicative price, you do so at your own risk. The State is not liable to you or any other person for any loss or damage arising from the use of, or reliance on, the indicative price.
Gaming machine revenue - 2016-17 gaming revenue data (please see Price for new venue operators above for more information)
EGM - Electronic Gaming Machine